Several aspects of the story have led the cryptocurrency community to cry foul play – the place of death and the signing of a will just days before the death, for example. However, the latest claims made by researchers appear to be the most damning of all thus far.
According to research conducted by blockchain analysis firm Elementus and reported by The Block, there is evidence to suggest that QuadrigaCX had little to no Ether in cold storage. Elementus looked closely at the Ethereum blockchain and transactions associated with the Canadian cryptocurrency exchange to arrive at said conclusion.
At a fully-solvent digital asset exchange, hot wallets are used for deposits and withdrawals, with excess funds being sent to cold storage at a certain threshold for safekeeping. The investigation into QuadrigaCX found that deposits taking the exchange’s hot wallets above the balance needed to operate the trading venue efficiently were not sent to cold storage. Instead, they were sent to other exchange platforms, via two Ethereum addresses:
Furthermore, the Ethereum blockchain shows that no ETH was sent from these addresses during the last two weeks – since the announcement of the CEO of QuadrigaCX’s death. However, funds had moved after December 9, 2018 – the date Gerard Cotten is supposed to have passed away, taking with him the exchange’s cold storage data, or so the story goes.
The funds leaving the two addresses quoted above were sent to Binance, Poloniex, Bitfinex, ShapeShift and other large exchanges. These transactions were small but numerous, leading Elementus to conclude that there was an effort being made to keep said transfers from drawing suspicion.
The number of Ether supposedly held by QuadrigaCX was 430,000. However, Elementus believes that the total amount transferred to exchanges exceeds that figure.
Also supporting their claims, Elementus cited the withdrawal issues claimed by many customers before the death of Cotten. This, for the analytics firm, is further evidence that the funds were not in a cold wallet at all. If they had been they would have been used to pay customers requesting funds.
The researchers at Elementus are not the only ones to have suspicions over the legitimacy of the story told in court this week. Taylor Monahan, the CEO and founder of MyCrypto, Tweeted the following on Monday:
2016: 0x0ee4e2d (blue)Biggest outgoing TXs go to:– A Bitfinex Deposit Address #1 (red)– 0x027beef (green)– 0xb6aac (purple) pic.twitter.com/jsPOnIADGI — Taylor Monahan (@tayvano_) February 4, 2019
She takes an even more speculative view of the operations of the exchange, stating the following:
“… don’t forget that Quadriga ran an exchange with KYC. They have a piles of user’s KYC data. They could turn around and open an exchange account with any of that KYC data to move money. Having fun yet?”
With the evidence of something untoward going on at QuadrigaCX continuing to mount, the eventual court hearing no doubt cannot come fast enough for the customers who have lost out thanks to their own poor security precautions and the seemingly shady business practices of the exchange. NewsBTC will bring you further updates on this story as it develops.
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